January 31, 2025 at 08:03AM
January is typically the best month for gold in the past two decades and this year, the seasonal trend rings true again. The precious metal is up nearly 7% on the year as it continues its hot streak from 2024. There was a bit of a setback in November and December but gold buyers have taken things in stride to start the new year at least.
We’re now seeing price clip the $2,800 level for the first time and there’s still plenty to be bullish about for gold in the big picture.
I’m not alone in saying that my position on gold remains unwavering in that I still see plenty of positives for the precious metal. And that however things play out this year, gold will remain a buy on dips regardless.
Looking at the outlook for the year ahead, any potential trade escalation could trigger safety flows into gold. Sure, that might be balanced out by inflation fears and the Fed staying sidelined. But do remember, this is a market that is pricing just under two rate cuts for the year already.
Meanwhile, bond yields looked to have hit a top for the time being. And even with the run higher in yields previously, it hardly put a significant dent on gold prices. And that’s a positive takeaway – one that is really as good as it gets in my view.
That being said, there are challenges not just from a technical and overstretched standpoint. It is that much of the plus points for gold are already made known. There’s still a chance that gold could catch a fiscal tailwind from the US, but I reckon that is unlikely given how things are playing out now.
But from a macro perspective, it’ll be hard to challenge the narrative so long as major central banks are still on the easing path; albeit slowing down. And the fact that they are also still buying up the precious metal, in particular China.
The $3,000 mark will not be a farfetched target for this year I feel.
This article was written by Justin Low at www.forexlive.com.
